The Government has revealed a dramatic increase in the number of pensioners with incomes over £50,000.
In response to a question from former pensioner minister Baroness Altmann, the Government said the number of people over state pension age with incomes of £50,000 or more had risen from 418,000 in 2016/17 to an estimated 474,000 in 2018/19.
You can read the full question and Government response here: https://www.parliament.uk/business/publications/written-questions-answers-statements/written-question/Lords/2019-07-01/HL16778/
Tom Selby, senior analyst at AJ Bell, comments: “The retirement of post-war ‘baby boomers’, who were more likely to benefit from rising house prices and generous defined benefit pensions, is likely at least in part behind the surge in the number of wealthy retirees in the UK in recent years.
“This is also the group of people who will likely benefit most from Prime Minister-in-waiting Boris Johnson’s proposal to increase the higher-rate tax threshold to £80,000 as they will not be affected by corresponding plans to raise the National Insurance upper earnings limit.
“Of course it is possible a future Government will decide to levy NI on pensioners’ incomes, although this would be extremely unpopular among a section of society that tends to hold significant influence at general elections.
“Over the longer-term the proportion of people enjoying retirement incomes at this level is likely to deteriorate significantly, with the responsibility for pensions provision shifting from employers and the state to individuals.
“In this environment even diligent, high-income savers will struggle to generate a retirement income anywhere near £50,000.”
Five ways to boost your retirement income
While a £50,000 pension income is out of reach for most people, there plenty of simple steps you can follow to boost your retirement pot over the long-term:
• Save as much as you can as early as you can, giving your fund time to benefit from the magic of compound growth
• Think about your investments and consider whether you’re happy to take a bit more risk (and accept greater volatility) in order to have the chance to benefit from long-term growth
• Keep your costs as low as possible – overpaying in fees can reduce your final pension pot by thousands of pounds
• Manage your withdrawals in retirement so you avoid overpaying tax
• Consider retiring later or working part-time. While this won’t be for everyone it could be a great way to supplement your pension income